Institutional Arrangements, Property Rights, and the Endogenity of Comparative Advantage

Abstract:     
This Article argues that institutional arrangements and security of property rights can have an impact not just on investment and growth, but on comparative advantage and the pattern of trade as well.

It considers the empirical evidence on the relationship between property rights regimes and investment, and briefly examines some of the empirical literature from the “new” growth theory. After considering the implications of the factor proportions model for patterns of production and factor endowments and examining the model’s poor empirical performance, as well recent work suggesting that all exports are not necessarily the same in terms of their impacts on economic growth, the analysis focuses on how institutional arrangements can vitiate or enhance comparative advantage. Using two case studies, as well as one shorter illustration, I examine the link between institutional arrangements and trade patterns, and then discuss the policy implications of these findings, particularly for the allocation of scarce institutional capital in developing countries.

Number of Pages in PDF File: 39

Keywords: comparative advantage, investment, property rights, trade

JEL Classification: F13, F55, F47, K11, K40

Accepted Paper Series